Dueling lawsuits: Wayne State pediatricians sue own practice group, so practice group sues Wayne State

WSU closer to forming new pediatric group

Wayne State Medical School is making plans to create its own pediatric medical practice if an ultimatum to University Physicians, the university's current pediatric affiliate, doesn't pan out. Read story.

A pair of lawsuits involving a pediatrics group practice affiliated with Wayne State University offers a window into ongoing conflicts about the group's future and how tightly affiliated it should be with the university.

Earlier this year, three Wayne State University pediatricians filed a lawsuit against University Pediatricians, a quasi-independent pediatric group, charging that UP has breached its fiduciary responsibilities and flouted university bylaws on affiliated clinical practices.

With 220 physicians, UP is the main medical group that services Children's Hospital, one of the biggest cash generators for DMC. Other pediatricians and specialists from Henry Ford Medical Group, St. John Providence and Beaumont Health also hold staff privileges at Children's.

Secord et al vs. University Pediatricians was filed Feb. 17 in Wayne County Circuit Court. The three pediatricians are Elizabeth Secord, M.D., who has been at Wayne State and UP for 20 years; Lynn Smitherman, M.D., a 21-year member of UP and WSU; and Eric McGrath, M.D., a UP and WSU member since 2010.

In its response, UP denied all charges that it is violating university and medical school policies and asked the court to rule on a motion to dismiss the case. A decision is expected by Sept. 28, said UP's lawyer, Bill Horton with Giarmarco Mullins & Horton P.C. in Troy.

Other UP defendants are Steven Lipshultz, M.D., former WSU chair of pediatrics and former president of UP; Madhvi Rajpurkar, M.D., Bhanumathy Kumar, M.D., Richard Humes, M.D., and Curt Stankovic, M.D.

But on May 8, University Pediatricians filed a lawsuit against Wayne State's board of governors in Michigan's Court of Claims. Among other things, UP is asking the court to declare that a 2002 implementation agreement — that Wayne State is mostly relying on as the basis of its complaint — has been replaced by a 2006 memorandum of understanding and a series of affiliation agreements.

Horton said UP filed the lawsuit against Wayne State to ask a judge to clarify the rights UP believes it has established in previous contracts, including the right to sign a teaching contract with DMC. UP signed a teaching contract with DMC last November, a contract that WSU contends breaches university bylaws.

Horton said Wayne State has created problems by trying to force UP into conceding gains it has made over the past decade to make itself more independent from WSU. He said Wayne State is using various funding and payment threats to force UP to change its bylaws and therefore fall under the control of WSU.

In an email obtained from WSU, Secord explained one reason the pediatricians filed the lawsuit against UP. The three pediatricians want the court to negate the three-year teaching contract that Lipshultz, while acting as president of UP, signed with DMC Children's. The lawsuit also says the agreement violates university policies and doesn't represent Wayne State's educational interests for its medical residents and faculty.

In a previous statement to Crain's, DMC confirmed a new three-year teaching agreement was signed between Children's Hospital and UP to train the hospital's pediatric residents and fellows. DMC has declined further comment.

At a Wayne State pediatric department meeting on Aug. 18, Wilson addressed some of the issues the lawsuit raised, including the following:

First, on July 20, Wayne State presented the board of UP an updated salary reimbursement agreement for them to sign. The document remains unsigned past the Aug. 15 deadline Wayne State gave UP. Under the agreement, Wayne State pays pediatrician faculty salaries and benefits, and UP reimburses Wayne State for its clinical services share of the paychecks. The single paycheck covers physicians' clinical, teaching and education payments.

Horton said UP has refused to sign WSU's new salary reimbursement agreement primarily because it is a 25-page document with additional requirements where the previous agreement was one-page agreement.

UP owes Wayne State $5 million in payments to WSU related to the salary reimbursement agreement, Horton acknowledges.

Hefner told Crain's UP President Mary Lu Angelilli, M.D., has met several times with Jack Sobel, M.D., dean of Wayne State's medical school, to discuss the disputed agreements.

"She gave him two signed documents and told him feel free to make changes," Hefner said. "But when we looked at the paperwork, what they presented us was the same as before, something we already rejected. They just put it into legal documents."

At that point, Sobel instructed Hefner and other university officials to seek alternative plans than to working directly with UP. He said he prefers to continue WSU's relationship with UP, but it appears headed for divorce court.

Over the past two weeks, Hefner said, WSU has been reviewing pediatric faculty members that receive paychecks from the university that also include clinical payments. He said the review could be completed in two more weeks.

"We have not decided when to stop adding in the clinical payments" to the paychecks, Hefner said. "I would affect about 90 to 130 people."

Hefner said if UP doesn't sign the salary reimbursement agreement, "then clinical salaries will end up not being paid by university, and the benefits and faculty appointments will be interrupted."

On the Medicaid enhancement payments, Hefner said Wayne State already has given UP a termination notice effective Oct. 31. The payments amount to $8 million to $10 million a year to UP. Wayne State manages the state-funded Medicaid payments for the faculty doctors who see uninsured and Medicaid beneficiaries.

Horton said UP has refused to sign the affiliation agreement, which contains the Medicaid enhancement arrangement, because it contains language that would limit UP's independence.

Hefner said some of the new language was approved by WSU's board of governors, updating how the "dean's tax" and the Fund for Medical Education and Research works. The FMRE is the account where the 8.7 percent dean's tax on clinical practice professional fees are kept.

Wayne State, UP problems go back more than a decade

The disputes are part of a long-running conflict over how tightly affiliated the pediatrics group should be with Wayne State.

For at least the past 10 years, conflict and distrust existed between UP and the medical school, Sobel said.

"Dr. (Bonita) Stanton and Dr. (Robert) Mentzer had a conflict that (resulted in the creation of) multiple changes in bylaws that created barriers and more independence with UP that violated the dean's guidelines," said Sobel, adding that he has been trying to mend the relationship the past several years.

Stanton was former UP president and WSU pediatrics chair who left last year to become the dean of a new medical school at Seton Hall University in South Orange, N.J. Mentzer is a former WSU medical school dean.

But Sobel this week issued a statement to WSU pediatric faculty that pledged not to force UP to join UPG.

Most pediatricians want UP to remain independent, at least for the time being, especially amid financial woes at UPG thar are just now starting to turn around.

Wayne State has projected that UPG and medical school losses would decline from about $17 million in 2016 to down to $11.6 million by the end of this year, WSU has previously said. Break even is projected for fiscal 2019 ending Sept. 30.

Sobel said a core value for him is for UP to remain independent. Hefner said UP merging with UPG "would never happen."

Still, some pediatricians told Crain's, while they value their independence, they could agree to joining UPG if it included a future merger or affiliation with Henry Ford Health System.

Hefner acknowledges he is talking with many different health systems and their physician groups about a merger, affiliation or partnership for UPG.

Even if this scenario doesn't happen, several pediatricians and management sources said their long-shot hope for sometime in the future is for them and the community is if Tenet were to sell DMC Children's Hospital, a nationally respected institution with a strong bottom line.

Some pediatricians who requested anonymity due to the ongoing conflict say they are tired of three years of budget cuts at DMC that have taken away such critical staff as housekeeping, maintenance, nursing, social services and chaplain services. Some say they would prefer to work under the ownership of a nonprofit institution.

Moreover, some pediatricians feel like the Children's Hospital Foundation of Michigan, which had been part of Children's when it was a nonprofit hospital before it was sold in January 2011 to for-profit Vanguard Health Systems, could return to using charitable donations to fund capital and programs if the hospital became nonprofit again. Vanguard sold DMC to Tenet in October 2013.

McLaren has already publicly stated it would like to acquire Children's. Henry Ford and many other hospitals also are believed to be interested in acquiring Children's Hospital if Tenet put it on the market. That's unlikely at this point because Tenet has designated DMC hospitals as core to their business because of the profits it contributes to the company.

Horton said UP prefers to remain with Wayne State. However, he said "multiple academic institutions are available" as alternatives to Wayne State.

The two nearest medical schools are the University of Michigan in Ann Arbor and Oakland University William Beaumont School of Medicine. Michigan State University also sends osteopathic students and faculty to DMC in a teaching affiliation.

Horton said the issue of the day harkens back to the 2006 time period, when conflict threatened the UP-UPG and Wayne State relationship.

In 2006, Horton said, one of the goals Wayne State had was for "UP to merge into UPG and become under the control of the medical school." He said the memorandum of understanding document signed that year was a compromise agreement after UP refused to merge.

Hefner denied that the current lawsuit and contract disputes with UP is a power play to gain control of UP to use as a bargaining chip with DMC or in any merger talks with Henry Ford or any other group. Sobel said he is committed to honoring UP's desire to remain independent.

Editor's note: This story has been edited to comport with Crain's guidelines on the use of anonymous sources.